According to a Union Bank of India report, the rupee is forecast to hold within a 95.30–96.80 band throughout October, with healthy foreign exchange reserves and trade deals acting as a floor beneath the currency, even as climbing international yields and outflows from foreign portfolio investors keep downward pressure in play.

Throughout September, the rupee traded unsteadily, edging lower against a backdrop of persistent downward pressure. Deposit flows into the Reserve Bank of India's Foreign Currency Non-Resident (Bank) — or FCNR(B) — scheme lifted foreign exchange reserves to a record USD 785.71 billion during the opening week, a level at which the rupee traded at 94.26 to the dollar.

A strengthening Dollar Index — driven by the Federal Reserve's rate increases — combined with crude oil climbing from USD 90 to around USD 110 per barrel through the opening two weeks of September, stoked balance-of-payments anxiety in foreign exchange markets and pushed the rupee down to roughly 96.15 by the close of that month. Trading at 95.83 against the dollar, the rupee wrapped up September's final session at that level.

Pressure on the rupee also came from foreign portfolio investor activity, with net outflows from Indian equities and bonds totalling roughly USD 5.9 billion across September. Within the equity segment alone, a net USD 3.8 billion left Indian markets during the period — a sharp departure from the two preceding months, when foreign investors had collectively channelled around USD 7 billion into the country across July and August.

Through the current FY27 period, foreign portfolio investors have withdrawn a cumulative total exceeding USD 21 billion from Indian financial markets.

Additional buying pressure on the rupee came from FCNR(B) deposit inflows alongside a build-up in foreign exchange reserves. By 18 September, the package of measures rolled out in June had drawn roughly USD 143.5 billion in external capital, with around USD 133 billion of that total channelled through FCNR(B) deposit schemes, lending a degree of stability to the rupee's exchange position. At the time of reporting, foreign exchange holdings totalled USD 765.9 billion — a buffer sufficient to fund roughly 11.2 months' worth of goods brought in from abroad.

Forward premiums on USD/INR contracts moved upward after the Reserve Bank of India intervened in the forward foreign exchange market, conducting sell-buy swaps aimed at withdrawing surplus rupee liquidity from the broader financial system. A quarter-point rate increase is pencilled in for October 2026, with the institution's outlook pointing to one or two further adjustments before FY27 draws to a close.

Trade agreements across several markets, a rebound in oil prices toward the USD 100 per barrel mark, and a well-stocked foreign exchange buffer are among the factors seen underpinning the rupee through October — though climbing yields globally and outflows from foreign portfolio investors continue to weigh against those tailwinds. Forecasters place the rupee on a largely flat path through October, with movement anticipated to stay within the 95.30–96.80 band.